Assented Stocks Or Bonds

A term which describes securities, deposited under an agreement by which the owners assent to some change in the status of the securities. Many reorganizations of properties are carried through without foreclosure or other legal process, the owners of the securities assenting to some change in the status of their stocks or bonds such as an exchange for new securities, with possibly less principal, or interest. See also Reorganization.

Assessment

An assessment on a security is a demand or call from a company or its management upon stockholders to pay into the treasury a specified sum of money on each share of the security which they may hold. There are many kinds of assessments, the most common in Wall Street being that which resuits as part of a plan of reorganization by means of which funds are secured for the discharge of debts and for working capital. While most stocks of railroads and other large corporations are, in a legal sense, nonassessable yet in a reorganization where conditions have made it necessary for the different security-holders to make concessions and sacrifices, assessments are often paid. These assessments are, of course, in a sense voluntary, and are agreed to by the stockholder and paid in order to preserve the property with the hope that the reorganization will result in ultimately adding value enough to the securities to repay the stockholder for the expense of the assessment. Often the stockholder has no alternative except to pay the assessment. If he does not pay it, usually an underwriting syndicate stands ready to take his stock at a current market price (which is often a merely nominal one) and pay the assessment itself. This results in the former stockholder sacrificing practically his entire interest and he is then, in a sense, "frozen out." Any future benefit from the reorganization is, of course, derived by the payer of the assessment, who naturally takes the chance of the future success of the company and is therefore entitled to its future profits.

Assigned In Blank

The ordinary stock certificate has on its back a printed form of assignment, whereby the owner of the certificate can endorse the same and thus make it a good delivery in selling it or passing it on to another party. By signing this form in blank he makes a legal and formal assignment of the stock to any purchaser who, of course, can fill in his own name in the blank provided for the purpose and then have it transferred on the books of the company in the usual way, receiving a new certificate in his own name. The New York Stock Exchange rules provide that any stock certificate assigned in blank by the owner must carry a witness to the signature, and also a formal guarantee of the signature by some stock exchange house in good standing. This, of course, is to guard against forgeries, errors, etc.

This is a speculative term describing a method of purchases or sales of stock, which speculators often pursue in advancing or declining markets, for the purpose of improving their position regarding the average cost of certain purchases or sales of stock. For instance, should a man be dealing in New York Central stock on a speculative basis, he might begin by purchasing 100 shares at 110.

Should the price then decline to 105, his transaction up to that date would show him a loss of $500. He might then purchase another 100 shares at 105, and he would thus be carrying 200 shares at an average cost of 107 1/2. Should the price then advance to above 107 1/2 his entire account would show no loss, and he could close out the transaction 2 1/2 points below the cost of the first hundred shares and yet not lose any money. The practice of averaging is carried on sometimes on a much larger scale. Investors or speculators will often put in orders to make purchases on a "scale down," buying at every point or two, and in a declining market where a given stock may drop 25 points, 100 shares may have been purchased at every point down. Each purchase naturally brings the average cost of the entire account down to a lower figure.

The method of averaging is also employed in the sales of stocks by investors and speculators in the same way, both in selling stocks for long account and for short account.

The difference in money value between sales and purchases. In foreign trade, the difference in money value between exports and imports. As commonly used the term signifies the balance or difference in favor of a country; as, for instance, the United States as against the rest of the world; or in favor of the rest of the world and against that country. When exports exceed imports over a given period the balance of trade is said to be in favor of the country, and vice versa.

The banking business is almost as old as civilization itself. Money lenders are mentioned many times in the Bible and in all other ancient literature, but banking in its modern sense as understood in the civilized countries of the world today is more of an evolution that has resulted as the natural outgrowth of modern industrial development and commercial conditions. Modern banking may be said to have begun, therefore, within the past three hundred years. Prior to that time each man was, in a large degree, the individual defender and protector of his own property. For instance, three centuries ago it was not safe to venture out after nightfall in the streets of London unless properly armed or in company, and the carrying of valuables of any kind was particularly hazardous. Goldsmiths, who in those days necessarily had to keep on hand large stocks of the precious metals, took great precautions for the safe keeping of property of this kind and people gradually acquired the habit of depositing money with them, paying something for the privilege in order to receive the accompanying protection. In the course of time the goldsmiths learned from experience that many people who had so deposited money did not require it at once, and they thus began to lend out a certain percentage of their surplus on their own authority. Furthermore, it was found that if a man had to discharge a debt it was often more convenient for him to give his creditor an order for the money on deposit with the goldsmith than to go in person and carry away the gold and deliver it, and thus impose upon the creditor the necessity of returning the gold for deposit in his own name, and many times in the same place. This situation developed the system of a transfer of credits by means of checks. This method was not only safer but much more convenient than the earlier method of delivering the actual coin or bullion. In making loans, likewise, the goldsmith now became the banker and learned to merely put the loan on his books as a credit to the borrower, against which the latter could draw his order or check precisely as if he had deposited the actual money; or the goldsmith issued his own note or promise to pay to the borrower, the latter passed it on in payment of debts and it became a circulating medium wherever the credit of the goldsmith was good.

Modern banking has evolved to its present state from this beginning. The chief function of the modern bank is to receive on deposit and make legitimate use of the money of its customers. It makes this money and its own paid up capital the basis of loans, on which it charges interest in accordance with the laws under which it is chartered. While these loans may take the form of actual money, they are, as a rule, merely credits against which the borrower is privileged to draw. Such loans are entered on the books of banks as deposits. In actual experience the loans and deposits so nearly counterbalance each other that only a small percentage of actual money is required to transact the larger affairs of business. It is only in retail transactions, in the payment of employees and in the smaller daily affairs of life that actual money is usually used. For all other business the transfer of credits by means of bank checks and bills of exchange is the almost universal rule. In brief, the modern bank has become the principal mechanism of exchange. To what a remarkable extent bank checks have supplemented or taken the place of actual money as a medium of exchange in modern business, thus making possible the wonderful commercial and industrial activity of the present day, can be best realized by studying the figures of the operations of the various clearing houses of this and other countries and the relation which the actual money in the vaults of the banks bears to the total transactions recorded.

In addition to its functions as depositories for money and the negotiation of credits, the modern bank exercises the function of note-issuing. In the United States, under the national banking law, any national bank may issue notes up to the amount of its paid in capital stock upon depositing with the United States Treasurer, government bonds of the United States equal in par value to the amount of circulating notes so issued. State banks are also authorized to issue notes, but the Federal tax of 10% on their circulation acts as an effective prohibition on the exercise of this right.

While the business of banking is embraced within the above general scope, yet the term banker is very broadly used, particularly in the United States. Stock brokers, investment dealers, dealers in exchange and commercial paper, money lenders, and others are accustomed to call themselves bankers. Strictly speaking these are inaccurate uses of the term, although it is now generally acknowledged that in modern usage the term banker must be understood to carry a broader meaning than was formerly the case.